CONSUMER BEHAVIOUR

Chapter 2 — Complete Study Notes

Market Segmentation & Real-Time Bidding

Includes Pakistani Examples | Exam Tips | Key Definitions | Full Concept Coverage

📋 What Is This Chapter About?

This chapter has THREE main topics. Make sure you understand all three for your exam:

Learning Topic Quick Summary

Objective
LO 2.1 Market Segmentation How to divide buyers into groups using demographics,
lifestyles, benefits, usage & media
LO 2.2 Selecting Target Markets How to pick and reach the right segment — it must be
identifiable, profitable & reachable
LO 2.3 Real-Time Bidding (RTB) A digital advertising method that targets individual users
instead of large groups

SECTION 1 — MARKET SEGMENTATION (LO 2.1)

1.1 What Is Market Segmentation?

Market Segmentation: The process of dividing a market into subsets (groups) of consumers who
share common needs or characteristics. Each group is different from other groups.

Think of it like sorting people into different boxes based on what they have in common — their age,
income, lifestyle, etc.

After dividing the market, a company must:

• Choose segments that are PROFITABLE (big enough to make money)
• Choose segments that are REACHABLE (you can actually communicate with them)
• Choose segments that fit the company's OBJECTIVES and RESOURCES

🇵🇰 Pakistani Example: Unilever Pakistan (makers of Surf Excel, Lifebuoy, Omo) segments its
market by income level — selling premium detergents like Surf Excel to upper-middle class, and
cheaper brands to low-income households in rural Punjab and Sindh.
 Product Positioning: The process by which a company creates a distinct image and identity for its
products/services/brands in consumers' minds — making it stand out from competitors.

Product Repositioning: Changing and 'refreshing' how a brand is presented — updating its image
to appeal to a new or different audience.

Real Example from the Book: Old Spice was seen as an 'old man's brand.' Procter & Gamble
repositioned it for young millennials using the ad campaign 'The Man Your Man Could Smell Like'
featuring Isaiah Mustafa.
🇵🇰 Pakistani Example: Rooh Afza — originally marketed as a medicinal syrup — was repositioned
as a popular summer drink and Ramadan beverage, completely changing its brand image for
Pakistani consumers.

Usage-Occasion Segmentation: A strategy based on the fact that many products are bought/used
for specific occasions. Example: Mack's Earplugs targeted spring break beachgoers.
🇵🇰 Pakistani Example: Shan Foods markets its special biryani masala for Eid gatherings and
wedding events — a clear usage-occasion segmentation strategy in Pakistan.

1.2 Two Types of Segmentation Factors

Marketers segment consumers using two broad types of factors:

Factor Type Sub-type Examples

QUANTITATIVE Consumer-Intrinsic Gender, age, income, education
(numerical / measurable)
QUANTITATIVE Consumption-Based How much they buy, how often they buy, how
(numerical / measurable) often they do leisure activities
COGNITIVE Consumer-Intrinsic Personality, cultural values, political/social
(psychological / in the attitudes
mind)
COGNITIVE Consumption-Specific Benefits they want from products, attitudes
(psychological / in the toward shopping
mind)

📝 Exam Tip: In conceptual questions, you may be asked to classify a segmentation variable as
'quantitative' or 'cognitive.' Remember: if you can measure it with a number → quantitative. If it's
about feelings, opinions, or attitudes → cognitive.
1.3 Segmentation by Demographics
Demographic Segmentation: Dividing consumers by age, gender, ethnicity, income & wealth,
occupation, marital status, household type/size, and geographic location. These are objective and
measurable.

WHY Demographics Are the Most Important Segmentation Tool — 4 Reasons:

1. Easiest and most logical way to classify people. Data is more precise than other methods.
2. Most cost-effective way to find and reach segments (U.S. Census Bureau & syndicated
researchers organize data by demographics).
3. Helps identify NEW segments created by shifts in population age, income, and location.
4. Demographics DETERMINE many consumption behaviors — e.g., music preferences are closely
tied to age; leisure activities depend on age, education, and income.

A. AGE
Product needs vary a lot with age. Age is a key marketing factor.
• Young investors (mid-20s to mid-40s) → advised to invest in growth stocks
• Older people near retirement → cautious investments, bonds, less risk
• Marketers commonly target age groups with specific products (e.g., Colgate has different
toothpastes for babies, kids, teens, and adults)

Millennials (ages 18–34) are a huge target market:

• MTV developed programs specifically for them as their audience aged
• Keds sneakers let millennials use shoes as a canvas for drawing — connecting with their creativity
• Hollywood releases sequels of popular films (Harry Potter, Hunger Games) to attract teenagers
and young adults who watch movies repeatedly

🇵🇰 Pakistani Example: In Pakistan, Nestlé Milo specifically targets children and teenagers with its
energy drink positioning. Jazz (telecom) targets youth (18–30) with cheap data bundles, while Zong
targets older professionals with business packages.
📝 Exam Tip: If asked 'Why is age an important segmentation variable?' — Answer: Because product
needs, buying priorities, media habits, and disposable income all change with age.

B. GENDER
Many products are designed for one gender, but gender roles are blurring:
• More men are buying skincare products (exfoliators, moisturizers, aftershave creams)
• Stores redesigned men's grooming sections: open shelves, TVs showing sports, semiprivate try-on
areas — because men dislike talking to salespersons
• Dove launched 'Dove Men+Care' — a whole product line for men's skin
• Frito-Lay redesigned snacks to appeal to women and launched 100-calorie packages
• Van Gogh Blue Vodka targeted women (25–44) with the campaign 'You Unbottled'

🇵🇰 Pakistani Example: In Pakistan, Veet (hair removal) has traditionally targeted women but is now
seen in some male grooming ads. Meanwhile, Dalda ghee targets housewives and mothers in its
cooking-focused campaigns — a classic gender segmentation approach.
 📝 Exam Tip: Creative Question hint: 'How has gender segmentation changed?' → Talk about
blurring gender roles, men using beauty products, women in traditionally male-targeted categories.

C. HOUSEHOLDS / FAMILY LIFE CYCLE

Family Life Cycle: A composite variable that includes marital status, family size, age of family
members (oldest or youngest child), and employment status. It classifies a family into a 'typical'
stage.
Most families go through similar life stages, and at each stage they need different products and
services. Important consumption-changing events:
• Moving to a new home
• Getting married
• A child's birth or adoption
• Death of a close family member
• Significant change in employment
• Caring for older relatives

🇵🇰 Pakistani Example: In Pakistan, joint family systems affect buying behavior significantly. When a
son marries and brings a new bahu (daughter-in-law), the household's product needs change — from
furniture, kitchen appliances, to personal care products. Marketers like Dawlance target newlyweds
with home appliance bundles.

D. SOCIAL CLASS / SOCIAL STANDING

Social Class: The division of members of a society into a hierarchy of status classes, where
members of each class have similar status. Usually based on income, education, and occupation.
Key points:
• High-level jobs that need advanced education → more prestigious and high-income
• Income determines what people can afford
• P&G (Procter & Gamble) defines middle class as households earning $50,000–$100,000 (40% of
U.S. households). After the 2007–2008 financial crisis, these families became more price-
conscious → P&G introduced lower-priced product lines
• During financial crises, even wealthy people avoided being seen with luxury shopping bags, but
resumed luxury spending once markets recovered

🇵🇰 Pakistani Example: In Pakistan, social class segmentation is very visible: brands like Gul
Ahmed and Khaadi have premium lawn collections for upper-middle/upper class, while brands like
Lala Textiles or sale items target the lower-middle class. Property developers like DHA and Bahria
Town explicitly target elite/upper-middle segments with luxury housing.

E. ETHNICITY
Marketers segment by cultural heritage and ethnicity because people of the same culture share values,
beliefs, and customs.
• In the U.S.: African Americans, Hispanic Americans, and Asian Americans are important
subcultural segments
• Cosmopolitan Latina magazine was created specifically to target American-born, bilingual Latina
women
 • L'Oreal USA collaborated with Telemundo (Spanish TV network) to build a website for Hispanic
consumers
• Same product can be marketed to different ethnic groups but with DIFFERENT promotional
messages

🇵🇰 Pakistani Example: In Pakistan, ethnicity/language/region plays a major role. Pepsi ran regional
campaigns in Punjabi, Sindhi, and Pashto. Shan Foods has different masala products appealing to
regional food tastes — Sindhi biryani masala vs. Punjabi biryani masala.

1.4 Segmentation by Lifestyles (Psychographics)

Psychographics: Segmenting consumers according to their lifestyles, which consist of Activities,
Interests, and Opinions (AIOs).
Psychographic variables include:
• Buying patterns
• Opinions about consumption or social issues
• Values, hobbies, leisure activities
• How they spend their free time

Important relationship between demographics and psychographics:

• Demographics DETERMINE what consumers NEED (e.g., males and females buy different
products) and their ABILITY to buy (income)
• Psychographics EXPLAIN WHY consumers buy — their decisions and choices
• Example: Being a student = demographic. But WHICH student buys designer brands vs. thrift store
clothes = psychographic

🇵🇰 Pakistani Example: Two Pakistani university students might both be 20-year-olds from Lahore
(same demographics), but one shops at Zara/Outfitters while another shops at Sunday bazaar
(Psychographic difference in values and lifestyle).
📝 Exam Tip: Demographics tell you WHO the customer is. Psychographics tell you WHY they buy.
You may be asked to explain this difference with an example — use the student example above.

VALS™ — Values and Lifestyles Framework

VALS™: A widely used segmentation method that classifies America's adult population into 8
distinctive subgroups based on PRIMARY MOTIVATION and RESOURCES (financial, educational,
psychological).
Three Primary Motivations in VALS:
• IDEALS — guided by knowledge and principles
• ACHIEVEMENT — want to improve personal status and position
• SELF-EXPRESSION — want activity, variety, and independence

Groups at the TOP of the VALS framework have MORE resources. Groups at the BOTTOM have
FEWER resources.
 VALS Motivation & Key Characteristics
Segment Resources
Innovators High Resources (top) Confident, experimental, future-oriented, self-directed,
information-ready
Thinkers Ideals + High Old guard, plan before acting, have 'ought/should' values,
Resources traditional intellectual
Believers Ideals + Low Believe in right/wrong, me-too fashion, trust authority, don't
Resources want change
Achievers Achievement + High Me-first, family-first, busy schedule, status quo, money =
Resources authority
Strivers Achievement + Low Live in the moment, street culture, unstable jobs, want to
Resources improve but find it hard
Experiencers Self-Expression + Want to stand out, spontaneous, sociable, first in / first out
High Resources of trends
Makers Self-Expression + Practical doers, distrustful of government, protect their own,
Low Resources may seem anti-intellectual
Survivors Low Resources Quiet, routine-loving, cautious, risk-averse, prefer analog
(bottom) over digital

BMW Example from the Book: BMW could target the top 4 VALS groups differently: Innovators →
focus on innovative tech. Thinkers → reliability & value history. Achievers → safety & successful
image. Experiencers → the feel of driving.
🇵🇰 Pakistani Example: In Pakistan, Honda City targets Achievers (status, family-first buyers).
Suzuki Alto targets Strivers (affordable, practical). Land Cruisers/Prados target Innovators or high-
resource Achievers.
📝 Exam Tip: VALS questions in exams often ask you to match a product with a VALS segment.
Strategy: think about who buys it and why (motivation) and how much they can spend (resources).

1.5 Demographics + Geography (Geodemographics)

Geodemographics: A hybrid segmentation approach based on the idea that people who live near
each other tend to have similar financial means, tastes, preferences, lifestyles, and consumption
habits. As the saying goes: 'Birds of a feather flock together.'
Geography has always shaped what people buy — clothing (for climate), food, transportation, and
more.
• Nike placed weather-based ads in the Weather Channel app: if it's cold and dark → show Nike Pro
Hyperwarm line
• Absolut Vodka created limited edition flavored vodkas named after major cities (Absolut New York,
Absolut Chicago) — geography as branding
• Cheerwine soda (a North Carolina brand) built local loyalty before going national — regional
product success
 PRIZM®: A geodemographic system that classifies every U.S. household — by zip code — into 66
demographically and behaviorally distinct segments. It also classifies households by Lifestage
groups, Urbanization & affluence, ConneXions (technology adoption likelihood), and P$YCLE
(financial wealth/assets).

🇵🇰 Pakistani Example: In Pakistan, DHA (Defence Housing Authority) vs. Orangi Town in Karachi
represent completely different geodemographic segments. Retailers like Hyperstar (Carrefour)
opened in DHA and Clifton knowing the neighborhood demographics — high-income families who
spend heavily. Utility Store Corporation targets low-income neighborhoods.

1.6 Segmentation by Product Benefits

Benefit Segmentation: Dividing the market based on the specific benefits that consumers seek
from products and services. These represent unfilled needs.
When buyers feel a brand delivers a unique and important benefit → they become LOYAL buyers.

Example from the book — Colgate for Adults (benefits offered):

• Whitening
• Cavity protection
• Gingivitis protection
• Germ protection
• Breath freshening
• Enamel protection
• Tartar control
• Prescription only versions

Research on 3 service providers (dentist, hairdresser, travel agent) found 3 groups of benefits
customers seek:
Benefit Type What Customers Want
Social Benefits Being recognized by name, treated like a personal friend, feeling important
Special Treatment Extra attention, searching out best treatment, reasonable prices, priority in
Benefits queues
Confidence-Related Feeling confident the service will be done right, clear explanations, less
Benefits anxiety, low risk of things going wrong

🇵🇰 Pakistani Example: In Pakistan, HBL markets its premium banking services (Konnect, HBL
Cards) to different benefit-seekers: some want convenience (mobile banking), some want special
treatment (private banking lounges for VIPs), and some want security and trust (the confidence
benefit). Telenor Easypaisa targets unbanked people seeking the benefit of financial inclusion.
📝 Exam Tip: Benefit segmentation is considered the approach MOST CONSISTENT with the
marketing concept — because the marketing concept says: 'find out what the customer wants and
provide it.' Benefit segmentation does exactly this. This is a common conceptual question.
1.7 Segmentation by Media Exposure
As media becomes more diversified, marketers need to understand what benefits consumers seek from
different media types:

Medium Benefits Consumers Seek

Digital Newspapers Immediacy, accessibility, free cost
Traditional (Print) Better writing style, more depth and detail
Newspapers
Online Search (Car Car buyers replaced reading print ads with online searches to save time in
Buying) price negotiation
Mobile Devices Communication, watching sports/entertainment, value-added shopping,
managing finances

Although the internet is seen as a 'young' medium, people of ALL ages go online. However, different
age groups use it differently:
• Older people go online less frequently BUT still use social networking sites and email
• Online BUYING does not vary much across age groups — surprisingly

🇵🇰 Pakistani Example: In Pakistan, ARY News and Geo TV attract older audiences. TikTok and
Instagram dominate among Gen Z (15–25). Brands like Daraz use social media influencer marketing
for youth, while older consumers are targeted through TV commercials during Ramadan
transmissions.

1.8 Segmentation by Product Usage

Usage-Rate Segmentation: A strategy based on the differences among heavy, medium, and light
users — and nonusers — of a specific product, service, or brand.
KEY FINDING: A SMALL group of heavy users accounts for a DISPROPORTIONATELY LARGE share
of total product usage.
• Example: Only 25% of beer drinkers consume 75% of all beer → Beer companies target these
heavy users
• Light beer was positioned as 'less filling' → so heavy drinkers can drink MORE of it

Targeting heavy users vs. light users:

Strategy Example
Target heavy users Super Bowl beer ads — mainstream brands targeting heavy drinkers
Target light/medium Whole Foods beer section — exotic imported beers, microbreweries,
users premium products for people who drink less but have better taste and more
income
 Product Awareness Status: The degree to which a consumer is aware of a product and its
features, and whether they plan to buy it soon.
Product Involvement: The degree of personal relevance a product holds for a consumer.

Usage-Occasion Segmentation examples:

• 'Every time my son has a birthday, we take him to a special restaurant' → Occasion: birthday
• 'I always buy my wife candy on Valentine's Day' → Occasion: Valentine's Day

Examples of occasion-based marketing:

• Greeting card industry → created cards for Grandparents' Day, Secretaries' Day, death of a pet
• Florists & candy companies → Valentine's Day, Mother's Day
• Diamond industry → promotes rings as engagement symbols
• Watch & pen makers → promote as graduation gifts (May–June)
• Food brands (Campbell's, Kraft, Hershey, Kellogg) → promote online before holidays

NEW TREND: Consumers are questioning traditional food-time assignments:

• Oatmeal is now marketed for lunch or dinner
• Yogurt is marketed for dinner or dessert
• Greek yogurt brands ran Super Bowl ads positioning yogurt as a game-day snack
• Movie theaters now serve quinoa, almond-crusted goat cheese, sushi rolls alongside popcorn

🇵🇰 Pakistani Example: In Pakistan, Tapal Tea markets its Danedar tea heavily during Ramadan
sehri/iftar (usage-occasion). Mehman Nawaz (a cooking oil brand) targets wedding season cooking.
Cocomo and Sooper biscuits are marketed as school snacks — targeting children at a specific daily
usage occasion.

SECTION 2 — SELECTING TARGET MARKETS (LO 2.2)

2.1 Why We Need Targeting

All consumers are NOT alike. They have different needs, wants, desires, backgrounds, and education
levels.
Therefore, marketers must offer ALTERNATIVES that match the needs of different consumer groups.

Airline Example from the Book: Most airlines offer 4 cabin options: Coach, Premium Economy
(+50% of coach price), Business Class (2× premium), and First Class (3–4× business). Each has
clearly different benefits. Southwest Airlines ONLY offers one class — because their goal is cheap,
no-frills transportation.
🇵🇰 Pakistani Example: PIA (Pakistan International Airlines) offers Economy and Business Class.
Private carriers like AirBlue target price-conscious domestic travelers, while PIA Business Class
targets government officials and corporate travelers.
A good target segment must satisfy THREE conditions:

Condition 1: The Segment Must Be IDENTIFIABLE

You must be able to clearly define and recognize who is in this segment using segmentation bases like
demographics, lifestyle, etc.
• Some are easy to identify: age, gender, ethnicity (observable or answerable by questionnaire)
• Others are harder: benefits sought, lifestyle preferences (need special research to find)

Book Example — P$YCLE tool:

• A financial firm used P$YCLE to identify affluent Americans with income-producing assets who
invest in stocks, bonds, mutual funds, life insurance, real estate
• Within this group, they identified two sub-segments: 'Wealth Market' and 'Business Class'

Criterion Wealth Market Business Class

Demographics Millions in assets, median income Wealthy, median income $101K,
$137K, 55+ years, postgraduate 45–64 years, postgraduate
education, grown kids education, kids studying away
Profitable? 2.28% of 2.66 million U.S. 1.97% of U.S. households; trade
households; use many brokers financial instruments frequently
Stable? Invest regularly in mix of short & Still working, want to accumulate
long-term instruments more wealth before retiring
Reachable? Wealthy suburbs, country clubs, Wealthy suburbs, attend horse
read financial magazines races, read financial magazines
Aspirations Diversified portfolios, reluctant to Kids in expensive schools, want a
take risk, children's education paid second home, willing to take
for calculated risks

Condition 2: The Segment Must Be PROFITABLE

A segment must be LARGE ENOUGH to target profitably AND must be stable and growing.
• A segment can be identifiable but too SMALL to make money
• Example from book: Very athletic men with wide shoulders and narrow waists → identifiable but
too small for most American clothiers (except luxury brands Prada, Dolce & Gabbana)
• Teenagers → sizable, identifiable, able to spend → BUT unpredictable! They follow fads, and by
the time you manufacture for a trend, interest might be gone

IMPORTANT: Profitability also depends on FIT between segment and company's objectives/resources:
'The Pump' Restaurant Case: A NYC organic restaurant thrived as a small, side-street delivery-
focused spot. A new owner opened a large Madison Avenue location with an expanded menu — but
the kitchen wasn't set up for it, staff weren't trained, loyal customers were confused, rent was too
high. Business closed within a year. LESSON: Don't target segments that don't fit your resources and
capabilities.
🇵🇰 Pakistani Example: In Pakistan, Agha's supermarket in Karachi successfully targets the affluent
Clifton/Defence segment. If it tried to open in Lyari or Korangi (different socioeconomic segment)
without adjusting its model, it would fail — a classic mismatch of segment and company resources.
Condition 3: The Segment Must Be REACHABLE
You must be able to COMMUNICATE with the segment's consumers effectively and economically.
• Magazines (print and online) are one of the best tools for reaching narrow segments
• TV channels that focus on specific interests reach specific segments
• New media (ads on cell phones) creates new targeting avenues

Example reader profiles from the book:

Publication Median Income Key Reader Profile
Scientific American $90,000 70% men, age 47, 62% college+, 52%
managerial
National Geographic $72,000 55% men, age 42, 69% college+, 31%
Traveller professional/managerial
Wall Street Journal $285,000 63% men, age 45, 100% college+, impressive
earners & investors

🇵🇰 Pakistani Example: In Pakistan, Dawn newspaper readers are upper-middle/upper class,

English-educated urban professionals → advertisers like Toyota, Haier, and Habib Metro Bank place
ads there. Jung newspaper reaches a wider Urdu-reading middle-class audience → FMCG brands
like Tapal, Ariel, Surf Excel target them there.

Mobile Targeting
Smartphones and GPS have created powerful targeting opportunities:
Showrooming: When consumers use smartphones to scan barcodes of products in physical stores
and then check/buy them online at lower prices. This is a big problem for brick-and-mortar retailers.
Geofencing: Sending promotional alerts to the smartphones of customers who are near or inside a
store (customers must have opted into this service).
• Geofencing is how stores FIGHT showrooming
• Long visits and repeat visits to websites signal high product involvement and buying intention
• Websites can customize display based on past preferences: 'show cameras by brand or price?'

🇵🇰 Pakistani Example: In Pakistan, Daraz uses geofencing during 11.11 sales to send push
notifications to users near partner stores. Jazz Cash sends location-based offers to users in specific
cities. Careem uses GPS targeting to offer discounts in specific areas of Karachi or Lahore.
📝 Exam Tip: Showrooming and Geofencing are frequently tested. Remember: Showrooming =
problem for stores (people use phone to find cheaper price elsewhere). Geofencing = solution (store
sends alerts to your phone when you're nearby).

SECTION 3 — REAL-TIME BIDDING (RTB) (LO 2.3)

3.1 What Is Real-Time Bidding?
Real-Time Bidding (RTB): A technique that allows advertisers to reach the RIGHT user, at the
RIGHT place, at the RIGHT time, by buying individual advertising 'impressions' through an
instantaneous programmed auction.
Impression: A single customer (user) who becomes available for real-time bidding online. Also
called an 'eyeball.'

How it works — simple explanation:

• When YOU go online, you become an 'impression' (available for purchase)
• Advertisers BID on your impression in real time (milliseconds)
• The winning advertiser's ad appears on your screen
• This is why the same ad for sneakers or a car keeps following you around on different websites!

3.2 Traditional Advertising vs RTB

Feature Traditional Media Buying Real-Time Bidding (RTB)
What is purchased? Large bundles of audience (e.g., Individual impressions (one user at
TV show, magazine issue) a time)
Pricing Fixed CPM (cost per thousand Dynamic — bid varies per
views) — all impressions same impression based on value
price
Targeting Broad segment (demographics, Individual-level targeting
psychographics)
Guarantee Guaranteed inventory — you Non-guaranteed — depends on
know you'll reach X viewers winning the auction
Process Manual — contact publisher, Automated — algorithms, no phone
negotiate, sign contract, send ads calls/emails
Flexibility Pre-paid, no refund if ads don't Can quickly evaluate and replace
convert less effective ads
Best for Specific exposure goals, large Precise targeting, optimizing
reach, certainty of delivery spending on high-value prospects

Apple Analogy from the Book: Traditional buying = buying giant bushels of apples at a fixed price
(mixed quality). RTB = bidding for each apple individually — you end up with the same number but
you picked the best ones.
John Wanamaker (one of the first advertising pioneers) famously said:
"Half the money I spend on advertising is wasted; the trouble is, I don't know which half."
RTB solves this problem — you know exactly which ads are working and can quickly replace those that
aren't.

CPM (Cost Per Thousand): A marketing term for the price of 1,000 advertisement impressions on
one webpage. The 'M' comes from the Roman numeral for 1,000. Example: $10 CPM = $10 for
every 1,000 views of your ad.
3.3 Profiling Impressions — How Do They Know So Much About You?
The profile (detailed information) of each impression is built by DATA BROKERS (also called
aggregators) through 4 methods:
5. Web Crawlers — programs that travel the internet and capture: websites you visit, how long you
stay, what pages you look at, how often you return, and your personality/lifestyle from blogs,
tweets, Facebook profiles. They also track: what you've bought, items you left in shopping carts,
returns/exchanges.
6. Secondary Data — buying data from commercial services and collecting info from
local/government records.
7. Real-Time Updates — updating their data continuously (daily, weekly, monthly, quarterly,
biannually, annually).
8. Creating Data Segments — e.g., 'Soccer Moms' = all women aged 21–45, with children, who
purchased sporting goods in the last 2 years.

Web Crawlers: Programs that capture content across the internet and send it to the data broker's
servers. They track browsing behavior, purchases, lifestyle, and personality clues.
Predictive Analytics: Measures that PREDICT consumers' future purchases based on their past
buying behavior and other data. Also evaluate the impact of personalized promotions.

Predictive analytics answers questions like:

• When a visitor leaves a page, which page will they visit next?
• Which website features make people register?
• What makes visitors come back?
• What factors make visitors click specific ads?

Predictive analytics focuses on CHANGES in behavior — because big life changes signal new
spending:
• New baby → higher spending on baby products
• Upcoming marriage → home products, gifts, etc.
• Divorce → new furniture, separate accounts, etc.
• During these times, consumers spend more and shop less carefully → easier to influence

Target Pregnancy Example: Target developed a model to detect when a woman is pregnant from
her buying pattern changes (buying unscented lotions, zinc vitamins). They sent baby-related
coupons alongside unrelated coupons — to hide the fact that they had figured out she was pregnant.
Google Fashion Example: Google tracks fashion search trends to predict what's coming next: string
bikinis are declining, palazzo pants and tulle skirts are rising. They can also break down trends by
region — e.g., white jumpsuits spiked in Jackson, Mississippi, after a local stylist's fashion show.

Behavioral Biometrics: Originally called 'designed identity verification' — charting unique patterns
in how people perform activities like swiping a screen or walking while holding a smartphone. Very
hard to copy, especially when multiple metrics are combined. Used to verify that ads are reaching
the intended person.
3.4 How the RTB Process Works
The RTB process has two key technical components:
Application Programming Interface (API): The 'pipe' — announces each impression individually
as it becomes available for purchase. When you go online, you become an impression in the API.
The 'brain' = the RTB system → connects to the pipe, evaluates every impression, and makes the best
buying decision for the advertiser.

4 Types of Sites That Feed RTB Data

Type Example What They Do
Advertising DoubleClick Invisibly collect personal info and display ads
Analytics Scorecard Invisibly build consumer profiles as they browse the web —
Research can connect to actual names
Social Facebook Like / Widgets that track your browsing even when you're NOT on
Tweet buttons social media (they connect back when the widget loads)
Unblocked YouTube, Buzzfeed Deliver useful content online but may invisibly collect
Content personal data too

Cookie: A software code sent from a website and stored in your browser. Cookies remember: items
in shopping carts, your browsing history, which buttons you clicked, and form data like names,
addresses, passwords, and credit card numbers.

How Hilton used cookies (RTB example from book):

• You searched for 'flights to Paris in September' on [Link]
• CheapAir sold that search as a cookie through an exchange (eXelate, BlueKai)
• Hilton logged into the exchange, set criteria: 'people who looked for Paris flights'
• Hilton bid against other advertisers for that cookie
• If Hilton wins → their hotel ads follow you everywhere online, no matter what website you visit

Ad Exchange: A big pool of ad impressions where publishers (websites) paste their impressions
and buyers bid on them. Outcomes determined in milliseconds. Examples: eXelate, BlueKai,
Google, DoubleClick.

3.5 Data Brokers

Companies like ACXIOM are virtually unknown to the public but have massive databases about most
American adults:
• Acxiom's servers process 50+ TRILLION data transactions a year
• Database contains info on 500 million active consumers worldwide
• About 1,500 data points per person: age, race, gender, weight, height, marital status, education,
politics, buying habits, health worries, vacation dreams
 • Data collected from: public records, consumer surveys, credit card info, and other sources

📝 Exam Tip: Conceptual question: 'What are data brokers and how do they support RTB?' — Data
brokers collect and organize consumer data from multiple sources, build profiles (impressions), and
sell access to those profiles so advertisers can bid on specific types of consumers.

3.6 Advantages of RTB

Advantage Explanation
Precise targeting Target individual consumers at demographic, psychographic, AND
behavioral levels across many websites at once
Cross-channel campaigns Run the same campaign across direct mail, email, and internet ads
simultaneously to the same audience (e.g., dog shampoo to dog owners
via all channels at once)
No minimum spend Traditional media requires large minimums — too expensive for small
problem businesses. RTB lets startups with small budgets compete
Automated & fast RTB is algorithm-driven, no need for phone calls, emails, negotiations —
no human error
Replaces bad ads quickly Can immediately evaluate performance and swap out underperforming
ads
Pay for quality prospects Instead of paying for bulk, you pay premium for the RIGHT consumers —
less wasted spending

Cross-Channel Campaign: A marketing approach where the same audience is targeted through
multiple media channels simultaneously (e.g., email + direct mail + online ads) — enabled by RTB.
🇵🇰 Pakistani Example: In Pakistan, platforms like Google Ads and Facebook Ads Manager operate
as RTB systems. When a Pakistani user searches for 'laptop bags' on Google, advertisers like Daraz
or Ztechpk bid in real time to show their ads to that specific user across Gmail, YouTube, and
websites.

ALL KEY DEFINITIONS AT A GLANCE

Term Definition
Market Segmentation Dividing a market into subsets of consumers with common needs or
characteristics
Product Positioning Creating a distinct image and identity for products/brands in
consumers' minds
Product Repositioning Strategically changing a brand's image and identity
Usage-Occasion Segmentation Segmenting based on specific occasions when a product is
purchased or used
Demographic Segmentation Dividing consumers by age, gender, ethnicity, income, occupation,
marital status, household type/size, geography
Family Life Cycle A composite variable classifying families by marital status, family
size, age of members, and employment
Social Class Hierarchy of society members by status — based on income,
education, and occupation
Psychographics Segmenting by lifestyle: Activities, Interests, and Opinions (AIOs)
VALS™ Framework classifying adults into 8 segments based on motivation
(Ideals, Achievement, Self-Expression) and resources
Geodemographics Hybrid segmentation combining geography and demographics —
'birds of a feather flock together'
PRIZM® Geodemographic system classifying U.S. households into 66
segments by zip code
Benefit Segmentation Segmenting based on the benefits consumers seek from products
Usage-Rate Segmentation Segmenting by heavy, medium, light users, and nonusers
Product Awareness Status Degree to which a consumer is aware of a product and its features
Product Involvement Degree of personal relevance the product holds for the consumer
Showrooming Using smartphone to scan barcodes in stores and buy cheaper
online
Geofencing Sending promotional alerts to customers near or inside a store
Real-Time Bidding (RTB) Buying individual ad impressions through instantaneous
programmed auctions
Impression A customer who becomes available for RTB — one person targeted
at a time
Web Crawlers Programs that capture internet content and send it to data broker
servers
Predictive Analytics Predicting future consumer purchases based on past behavior and
data
Behavioral Biometrics Tracking unique patterns in how people swipe, walk while using
phones, etc.
Application Programming The 'pipe' that announces impressions as they become available for
Interface (API) purchase
Cookie Software code stored in your browser that tracks your browsing and
remembers your data
Ad Exchange Pool of ad impressions where publishers sell and advertisers bid —
outcomes in milliseconds
CPM Cost Per Thousand — price of 1,000 ad impressions on one
webpage
Cross-Channel Campaign Targeting the same audience through multiple media
simultaneously
 Data Broker / Aggregator Company that collects and sells consumer data profiles for use in
RTB

EXAM PREPARATION — LIKELY QUESTIONS & ANSWERS

Conceptual Questions

Q1: What is market segmentation and why is it important?

Market segmentation is the process of dividing a market into groups of consumers with similar needs or
characteristics. It is important because all consumers are not alike — they have different needs, wants,
backgrounds, and incomes. By segmenting, a company can:
• Design products and messages tailored to specific groups
• Avoid wasting money trying to please everyone
• Focus resources on the most profitable and reachable segments

Q2: How are segmentation, targeting, and positioning interrelated?

They form a sequential process:
• SEGMENTATION — divide the market into groups
• TARGETING — choose which group(s) to focus on (based on identifiability, profitability,
reachability)
• POSITIONING — create a distinct image for your product in that target group's mind
Think of it as: WHO are the groups? → WHICH group should we serve? → HOW should we present
ourselves to them?
🇵🇰 Pakistani Example: Example: A Pakistani telecom company (Jazz) segments by age and
income. Targets youth (18–25) who want cheap data. Positions itself as 'Pakistan's largest and most
affordable network.'

Q3: What are the advantages and disadvantages of demographic segmentation?

Advantages Disadvantages
Easy to measure and classify May oversimplify — not all 30-year-olds have the
same needs
Data is widely available (census, research firms) Ignores psychological/lifestyle differences
Cost-effective to reach identified segments Gender roles are blurring — demographic
categories becoming less clear
Can identify new segments from population shifts Demographics determine WHAT is bought — not
always WHY
Can demographics and psychographics be used together? YES — and they SHOULD be.
Demographics tell you WHO, psychographics tell you WHY. Combined, they give richer, more accurate
profiles.
🇵🇰 Pakistani Example: A 35-year-old male in Lahore (demographics) who loves cricket, values
loyalty, and is an 'Achiever' VALS type (psychographics) → targeted by a cricket-themed insurance
product from Adamjee or EFU Life.

Q4: Why is benefit segmentation considered most consistent with the marketing
concept?
The marketing concept says: 'Find out what the customer wants and provide it.' Benefit segmentation
directly identifies the unfilled needs/benefits customers are seeking and designs products to deliver
exactly those benefits. When a brand delivers the benefit the customer wanted → they become loyal
buyers. This is the purest form of customer-orientation.

Q5: What is the difference between Segmentation and RTB?

Segmentation Real-Time Bidding (RTB)
Targets GROUPS of consumers Targets INDIVIDUAL consumers one at a time
Based on shared characteristics Based on individual online data and behavior
Uses traditional media (TV, magazines, Uses digital/programmatic advertising platforms
newspapers)
Buys media space in bulk (guaranteed) Bids for individual impressions (non-guaranteed)
Slower, manual buying process Instant — millisecond auction
Good for large-scale brand awareness Good for precision targeting and optimization

Q6: How can predictive analytics be used in marketing?

Predictive analytics uses past consumer data to forecast FUTURE buying behavior. Marketers can use:
• a) Websites visited → understand what category of products they're interested in
• b) Engagement levels (pages visited, time on site, return visits) → measure purchase intention and
product involvement
• c) Consumer interests & personality from blogs/social media → build psychographic profiles
• d) Purchases, abandoned carts, returns → identify preferences, pain points, and purchase patterns
Most importantly: predictive analytics detects LIFE CHANGES (pregnancy, marriage, divorce) — when
consumers are most open to new spending. This is the best time to reach them.

Creative / Application Questions

Q7: Combine at least 2 segmentation bases for Men's Sneakers

Men's sneakers can be segmented by:
• Demographics: Age (18–35) + Gender (male) — young adult men are the primary buyers
• Psychographics: VALS 'Experiencers' — want to stand out, are trend-conscious, sociable, first
in/out of trends
 • Benefits Sought: Performance (athletes), style (fashion-forward), or value (budget buyers)
• Usage Rate: Heavy users (gym-goers, athletes) vs. light users (casual wearers)
🇵🇰 Pakistani Example: Nike Pakistan targets young men (18–30) who are performance-oriented
AND fashion-conscious, combining demographic + psychographic + benefit segmentation.

Q8: How can a health club use VALS for an advertising campaign?
The health club should target the top 3–4 VALS groups:
• Innovators: Focus on cutting-edge equipment, personalized tech (e.g., AI fitness trackers)
• Achievers: Position as 'where successful people stay fit' — status and image messaging
• Experiencers: Emphasize variety, new workout trends, social atmosphere, exciting classes
• Strivers: Offer affordable membership tiers, positioning gym as self-improvement
🇵🇰 Pakistani Example: Shapes Gym in Karachi uses Instagram and elite locations to target
Achievers and Experiencers. A basic gym in Gulshan-e-Iqbal targets Strivers with budget-friendly
monthly rates.

Q9: Choose a VALS segment for each of the following:

• SUVs → ACHIEVERS (family-first, status symbol, believe money = authority, need a big reliable
car)
• Financial Retirement Plans → THINKERS (plan before acting, consider long-term, have 'ought'
values about saving, high resources)
• New Smartphone Model → EXPERIENCERS (first to adopt new trends, want to stand out, sociable
— will show it off) OR INNOVATORS (tech-savvy, information-ready, future-oriented)

Q10: How would you segment the online Oakley sunglasses market?
Multi-layer approach:
• Demographics: Age 18–45, Male-skewing, Mid-high income (Oakley is premium priced)
• Psychographics: VALS Achievers (status) and Experiencers (trend-forward, sporty lifestyle)
• Benefit Segmentation: Performance benefits (UV protection, durability for sports) vs. Style benefits
(fashion accessory)
• Usage Rate: Heavy users (outdoor athletes, cyclists, surfers) vs. Occasional users (casual
wearers)
• Geographic: Urban consumers who are digitally active, likely to browse and buy online
• RTB Application: Target users who have visited sports/outdoor/fashion websites with cookie-based
follow-up ads

Q11: How can a marketer FIGHT showrooming?

Use GEOFENCING — send discount alerts, exclusive in-store-only deals, or loyalty bonus notifications
to customers' phones when they walk into or near the store. This incentivizes them to buy IN the store
instead of checking prices online. Also:
• Price-match guarantees
• Exclusive in-store experiences customers can't get online
• In-store loyalty points that are higher than online purchases
 🇵🇰 Pakistani Example: In Pakistan, Hyperstar (Carrefour) uses its app to send push notifications
and special deals to users near the store — a geofencing strategy to bring foot traffic in and
discourage customers from comparing prices on Daraz.

QUICK REVISION SUMMARY

Chapter 2 in 8 sentences:
9. Market segmentation divides buyers into groups with similar needs — a company then picks the
best group to target.
10. Marketers segment using demographics (age, gender, income, etc.), psychographics
(lifestyle/AIOs), geodemographics, benefits sought, usage rate, usage occasion, and media
exposure.
11. Demographics are the most important segmentation base because they are measurable, cost-
effective, and widely available.
12. VALS™ classifies adults into 8 groups by motivation (Ideals, Achievement, Self-Expression) and
resources; it explains WHY different groups buy.
13. A good target segment must be identifiable (you can define them), profitable (large and stable
enough), and reachable (you can communicate with them).
14. Showrooming (buying cheaper online after seeing in-store) is fought with geofencing (location-
based alerts to nearby customers).
15. Real-Time Bidding (RTB) targets individual users (impressions) through millisecond auctions,
unlike traditional advertising which buys large audience segments in bulk.
16. Data brokers, web crawlers, cookies, and predictive analytics work together to profile individual
users and make RTB possible.

Good luck on your exam! Remember: understand the concepts, connect them to real Pakistani
examples, and practice applying them to new situations.